Rich wrote:@Fasces as a decidedly non expert on the Chinese economy, I'd be interested to know your view on the post Mao GDP figures. Do you think there has been a significant overestimation of GDP growth over the last five decades or for any significant part of those five decades. I mean you could lose half a percent or even a percent every single year and the figures would still look impressive.
The central government sets GDP targets and those that reach those targets get promotions, so yes, perverse incentives exist for regional and municipal leaders, to hit certain numbers.
I think that many people look at Chinese GDP figures and hear they're 'fudging the numbers' and imagine that some low-level bureacrat is paid to literally make up some figures in a book and deliver that to Beijing. I'm sure this happens now and then, but the Chinese government tends to send people who do this to prison, and as such, I don't think its common. GDP by itself is easy to fudge without risking prison.
Instead, regional and municipal authorities do one of two things, or often, both. The first is to take out debt and build shit. A new bridge, a new road, a new railway station - this is direct investment and can bring up your yearly GDP figure. Does the infrastructure need to be built? Is the old stuff insufficient? Can we afford it? Who cares - build it anyway and bring our GDP to its current target. The number isn't so much 'fudged' in this case. Just that some of the GDP growth is 'artificial'. You'd expect a lot of municipal debt to start piling up, and low and behold, it has.
The second is to create a bunch of local tax incentives to bring companies in. Municipal governments own all their land, so maybe you lease it to them on very generous terms for thirty years and get a bunch of new factories built by foreign or domestic corprations and you look good and maybe get promoted long before the lease runs out - and when the lease runs out and its time to renew, heyo, the company jumps town to the next group of bureacrats offering more and better prizes, unless you can offer the same sweetheart deals (which means you are selling out your own tax base from under you and have to fund other projects through more and more debt).
The real problem in China isn't that it is hiding its true GDP or that the GDP figures are completely untrustworthy - rather that GDP itself may not be the best measure of a country's economic performance, and that Chinese officials have incentives to act in unsustainable ways to game the number, a number which is ultimately very easy to game.
For a long time this was fine. China was starting from so far behind that 'eventually' unsustainable still meant 'fifty years from now'. Over the past few years, the first signs that Chinese localities may be hitting the red zone have started to motivate the government to start moving past GDP alone. Covid, and the crash, also motivated that. The central government has started emphasizing sustainable development, both in terms of climate and debt, and de-emphasizing rapid growth - even outright saying that the 'era of rapid growth is over'.
Saying that the CPC will fall because their people won't accept any growth below 5% doesn't ring true to me, in my experiences in China - many people recognize the unsustainability of the past few decades of perpetual growth, and the cultural problems it has brought with it (breakdown of local culture, environmental degradation, expenses in raising a family, work-life balance, etc) and would be
happy with a slowing of growth and a more people-focused economy. China isn't a hermit kingdom and its people aren't blind to the world around them, either.
This is a problem every country in the world has to eventually grapple with.
Perpetual growth on a finite planet with finite resources makes no sense. Every country will need to make plans for an economy with 0% (or even negative) growth, probably in the next century. There is an upper limit on how much it is possible for humans to produce and consume.